Succession Planning On Paper Compared To The Reality...
More and more family businesses now have a succession plan. Far fewer have a succession that works. The difference between the two is where legacies are won and lost.
A plan sits in a drawer. A transition happens in the boardroom, on the shop floor and around the kitchen table. It happens in the conversations nobody scheduled and the decisions nobody wrote down.
New research from the United States puts a number on that gap. The Family Business Consulting Group and Plante Moran have revisited landmark surveys from 1995 and 1997 to see what has changed in thirty years. Their verdict is striking. Families are completing the technical work of planning, but what the plans actually say is not consistently understood or shared.
In other words, the paperwork has improved. The people have not always come along with it.
Succession On Paper
Succession on paper is the part advisers can tick off. It usually includes:
A will and estate plan, reviewed with lawyers and accountants
A shareholder agreement setting out who owns what and how shares can move
Tax planning, which in the UK means close attention to Business Property Relief and Agricultural Property Relief
A named successor, and perhaps a target date for the handover
A governance structure, such as a board, a family council or a family charter
None of this is wasted effort. In the current UK climate, with relief caps reshaping the economics of passing on a family firm, getting the technical side right has never mattered more.
But a document can only record intent. It cannot create trust, build capability or settle the unspoken questions that sit underneath every handover.
Succession In Action
Succession in action is what happens when the plan meets real people. It is the successor leading a difficult meeting for the first time, with the outgoing generation in the room. It is a long serving manager deciding whether to back the new leader. It is a sibling who is not in the business working out what ownership now means for them.
The families who do this well treat succession as a process, not an event.
The plan names a date. The action is everything that happens in the years before it.
Where The Gap Opens Up
Listening to the journeys of so many family businesses, the gap between paper and practice tends to open in five places.
The plan is a secret. Too often the senior generation and its advisers know what the plan says, and nobody else does. The US study found that education, communication and the risk of entitlement now worry owners more than competition or labour costs. A plan the family does not understand is a plan the family cannot support.
Authority arrives before readiness. A successor can be handed the title, or the shares, without the judgement, relationships or experience that made the founder effective. As one recent commentary on family offices put it, there is a difference between succession on paper and succession in practice: the right to make decisions is not the same as the ability to make them well.
The successor has not said yes. We often assume the next generation wants the business. The evidence suggests caution. A Sun Life survey found that only 31% of next generation members not already involved in their family business were fully willing to take it over. Independence and fear of the responsibility were the most common reasons for hesitation.
The outgoing generation does not let go. A handover with no real handing over is one of the most common, and most damaging, patterns in family business. The successor gets the office but not the authority, and everyone in the business notices.
Leadership and ownership are confused. Plans often treat them as one thing. In practice, a family can keep ownership while bringing in outside leadership. Deloitte found that 13% of surveyed family businesses had a non family chief executive, rising to 26% expected after succession. That can be a strength, but only if the family has agreed what kind of owners it wants to be.
Closing The Gap
The good news is that the gap can be closed. It takes time and honesty rather than more paperwork.
Talk about the plan, not just around it. Share its intent with the wider family and senior team, even if every detail is not yet settled. People support what they understand.
Ask the next generation, and listen to the answer. Make it safe for a potential successor to say no, or not yet. A reluctant leader is a bigger risk than an empty chair.
Build an overlap period. Give the successor real responsibility while the outgoing leader is still there to coach, not to correct in public. Agree in advance which decisions transfer, and when.
Bring in a bridge where it helps. A trusted non executive director, adviser or interim leader can steady the business and mentor the successor.
Separate the ownership conversation from the leadership one. Decide what it means to be a good owner, whether or not you also run the business.
Review the plan as a living document. Revisit it every year, and every time the family or the business changes. A plan written for one set of circumstances rarely survives another unchanged.
Questions To Reflect On
If your successor were asked today what your succession plan says, could they answer?
Has your chosen successor genuinely said yes, or have you assumed it?
Which decisions will you hand over first, and how will everyone know they have moved?
What would the business need from you if you stepped back tomorrow?
Does your family agree on what it means to be a good owner, separate from running the business?
A succession plan is necessary, but it is not enough. The families who pass on their businesses successfully treat the plan as the start of the conversation, not the end of it.
They prepare people as carefully as they prepare paperwork. They give the next generation a genuine choice, a real runway and the authority to lead.
Succession on paper protects the assets. Succession in action protects the legacy.
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